Duration of collaboration from a market perspective: An agent-based modeling approach

Maintaining a long-term partnership with a supplier is considered an effective strategy to achieve collaboration success in supply chain management (SCM). However, individual companies find that this approach does not always improve business performance. In this paper, an agent-based model (ABM) is developed to investigate the effect of duration of collaboration on supply chains from a market perspective. The model represents two-stage supply chains of an innovative product market, involving suppliers and manufacturers. The model outputs are measured by the rate of demand fulfilment and the number of supply chains which can survive in the market. The results show that duration of collaboration has no significant impact on both demand fulfilment and survivability of supply chains. This finding contradicts the common belief held in the literature about the benefits of long-term collaboration, but it corroborates examples encountered in practice. This study provides new insights to the practice of supply chain collaboration by taking a market perspective. The results show that a longer duration of collaboration does not provide a significant improvement to the supply chain's competitiveness from a market point of view, in terms of demand fulfilment and supply chain's ability to survive over the long-term. The implications of this finding to practice are discussed in the paper.